India’s Government Makes Banknotes Worthless by Decree Overnight

As I write this in the morning of 9th November 2016, there are huge lines forming outside gold shops in India — and gold traded heavily until late into the night yesterday. Depending on who you ask, the retail price of gold has gone up between 15% and 20% within the last 10 hours.

Gold quotes in India – gold traded for as much as Rs 49,000 per 10 grams or US$ 2,294 per ounce

At some places, it was sold for as much as US$ 2,294 per ounce. That is, if you can actually find physical gold — gold inventories at stores are rapidly depleting. All of this happened well before the international price started to move up because of the election results coming out of the US.

Last night (8th November 2016), India’s government banned the use of Rs 500 (~$7.50) and Rs 1,000 ($15) banknotes. This pretty much made most currency-in-use illegal. Banks and ATMs are closed today. The government believes that doing this will help eradicate corruption and push counterfeit money out of circulation. According to the Indian government, the counterfeit money tends to come from Pakistan and helps finance terrorism.

My first instinct when I heard the news was that people would be on the streets this morning. There would be riots and the Indian Prime Minister, Narendra Modi, would be unceremoniously thrown out. Despite being a huge critic of him, I thought he at least had the spine to take bold action, however erroneous it might have been.

I am sometimes too optimistic about India and expect too much goodness from Indians. And I was wrong.

In the morning no opposition against the government was in sight. But there was some animosity detectable between people. Forgetful that they had lined up until late into the night yesterday trying to get cash out of ATMs before midnight, had fought at gas-stations to get their gas tanks filled, and had suddenly been trapped with unusable currency, people exchanged congratulations on what Modi had done.

Indian prime minister Narendra Modi - Photo via news18.com

What Modi had done — contrary to what I initially thought — wasn’t a bold move. It was a populist move, designed to please the 98% who do not save. While they are really driven by envy, these 98% are putting on a brave face, celebrating the alleged defeat of corruption. To them the fights of yesterday — at gas stations and elsewhere — and the loss of trust in their fellow citizens is merely collateral damage.

Fresh Avenues for Corruption Immediately Open Up

Those who find themselves stuck with high denomination bills today, must accept as little as Rs 700 in usable currency for every Rs 1000 of banned currency.

At least theoretically, people can still use the otherwise banned bills at hospitals, gas stations, pharmaceutical shops, and train stations. As one would expect in India, these places have been converted into corrupt currency-exchange shops as of today. Some well-connected people are prepaying for their medical treatment.

But for most legitimate uses, none of these organizations are accepting the otherwise banned instruments. Why should they, when they can force customers to pay in the still-legal currency and then buy the banned instruments for Rs 700 for every Rs 1000 in face value, making a neat 43% extra profit without doing anything?

In India, a country not driven by morals or reason, almost everyone will exploit an opportunity to make an extra buck, however unethical it might be. Those who look deeper, understand that corruption in public life comes from ingrained corruption in India’s society and culture. If one had to make an effort to remove corruption this is where one should start.

1,000 rupee banknotes – worth 700 rupees each today, available from the newest entrants into the money-changer business. Unfortunately, their business model is fraudulent; it sure seems a strange way to “fight corruption”. Photo credit: Reuters

Today, there is utter chaos in the market, with only the spontaneously erupted black market available to bypass the ban — most people simply don’t have anything else but the banned currency bills. Some are booking train tickets for future rides and are subsequently canceling them — they can use the banned currency to buy the tickets and can then get legal currency back after ticket-cancellation charges. This is costing people a lot of time, but it is the only way they can stay afloat and buy food. Others are taking different measures, equally desperate.

By any sane person’s reckoning, corruption has skyrocketed for the moment. So has gold. Those who run businesses have lost whatever remnant of trust in the government they still had. In recent months several businessmen have confessed to me that they are closing down, because the state has become increasingly heavy-handed and bureaucratic. Contrary to what the World Bank and IMF are saying, India is suffering economically. Its institutions are crumbling. And India is on the path to becoming another banana republic.

Within a few days, assuming this issue is handled appropriately — which it won’t be — most people with a certain amount of banned currency will be able to deposit it at banks, although tied to withdrawal limits. The banking system will stay partly frozen. After the banks open tomorrow, I expect to see riot-like scenes outside bank branch offices for a few weeks.

Huge chaos in the Indian economy should be expected to continue — as India’s government is simply incapable of bringing liquidity back any time soon. Businessmen will waste their time dealing with this nonsensical event, instead of investing and creating wealth. India simply continues to do more and more of what makes it an uneconomical and wasteful place to invest in.

Civil servants are already finding ways around the cash shortage problem…Cartoon by Ross

Will the Plan Succeed in Reducing Corruption?

But will this eventually lead to a reduction in corruption? Let us use the gold market as an example to understand how the Indian economy operates. Any import of gold is subject to a cumulative tax of about 11%. The retail price of gold should be around 111% of the international price. Ironically, it mostly sells for 105% of the international price. Putting it simply, any law-abiding businessman must lose this 6% differential, ensuring his bankruptcy.

In reality most of the gold entering India is brought in by smugglers. These smugglers are happy to pass on almost half of their profit to consumers, while at the same time paying bribes to the Indian army, customs officials, other bureaucrats and politicians. If one wants to run a gold business, one must use smuggled gold if one wants to be competitive.

Virtually all businesses in India have to be run this way. Without paying bribes, no business has a hope of succeeding in India. Corruption is in the blood of India and is not easy to get rid of, even if by sheer luck India finds good political leaders one day.

Corruption is so omnipresent in India that you don’t really have to look for it. It is always there. What Modi is doing is merely political theater to fool the gullible. His decision to ban cash currency is actually proof that he has utterly failed to achieve any meaningful change in India.

I have yet to meet a public servant in India who does not ask for a bribe. During Modi’s reign, not only corruption has gone up, the state has become extremely heavy-handed. As what is happening today shows that the government’s anti-corruption measures themselves are ironically leading to a huge increase in corruption.

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Unsuccessful Google search in India… - Cartoon by Thommy

Conclusion - Part 1

Unfortunately, India’s degradation will not stop. Indians have become extremely nationalistic over the last two decades. They are now very easy to herd around. Under the color of nationalism they can be made to accept anything – of course, only as long as the victim is someone else. The currency issue of today affects maybe 2% of the entrepreneurial population of India, so the remaining 98% can claim higher moral ground for themselves. The reality is that without these 2%, India could rapidly become a carbon copy of Idi Amin’s Uganda.

What India needs is not a focus on the removal of corruption, but the removal of regulations and restrictions on wealth-creation. For now the state is doing exactly the opposite, as it has in the past. Most importantly, this poison of totalitarianism comes from the extremely irrational society of India - in which corruption is entrenched.

PART 2

Chaos in the Wake of the Ban

Part 1 above covered what happened in the first two days after India’s government made Rs 500 (~$7.50) and Rs 1,000 (~$15) banknotes illegal. They can now only be converted to Rs 100 (~$1.50) or lower denomination notes, at bank branches or post offices. Banks were closed the first day after the decision.

What follows is the crux of what has happened over the subsequent four days.

Today India is on the verge of a major social-political crisis, unless either the government backs off from the decision of banning the currency or some real magic happens. There is chaos in the streets and daily life is slowly but surely coming to a full halt.

What Modi did was not only heavy-handed, hugely arrogant, and of no value, it has been very badly implemented to boot — as everything in India always is — and carries the real potential of escalating and snowballing into something horrific. They could have seen that this was not going to end well by simply using primary school math.

Modi, Nationalism, and the Public School-Indoctrinated Middle Class

India today is like a cult under the influence of Narendra Modi — in which unlike in the past, not the poorest or uneducated citizens, but mostly members of the so-called educated middle class participate. Over the last two decades, people have been exposed to mass education, TV and nationalistic propaganda without being taught an iota of critical thinking skills.

In a society in which the concept of reason does not exist, this has made these people receptive to any kind of propaganda with a nationalistic or Hindutva bent. (Hindutva = fanatical Hinduism, which is rapidly metastasizing).

To aggrandize his position, Modi ordered a lot of military-hardware that India cannot afford, escalated tensions with Pakistan, and conducted what was very likely a fake surgical strike inside Pakistan. This united Indians under the flag.

Now, the demonetization of the Rs 500 and Rs 1000 banknotes was tagged with nationalism, anti-corruption, and anti-terrorism. Simple-minded, slogan-susceptible persons were hardwired to accept an erroneous causality. Those who did not go along were made to be afraid of being called pro-terrorist elements.

Those in the middle class have taken what they deem to be the higher moral ground, for they have mostly avoided suffering from the demonetization. Lacking moral instincts — which is unfortunately the case with much of Indian society, given its deep-rooted irrationality and superstitions — they cannot see or feel the pain of those who are suffering, even if that suffering stares into their faces.

But events are in motion that will likely very soon lead to these salaried members of the middle class starting to feel the pain as well. Their instinctive trust in Modi is likely within weeks of coming crashing down, not because of reasoned argument, but because they will be facing similar problems as the ones the common man is now facing.

Conversion to the New Currency

I went to convert my banned banknotes into new ones. The largest amount one can have converted is Rs 4,000 ($60), until further notice. There was a huge rush of people at the bank. Arguments were erupting, as people refused to stand in queues and the banks gave no explanation of what needed to be done. Fights were breaking out.

Amid the chaos I finally learned that there were three queues I had to go through in a sequence. I had to get a form from one counter, which I had to fill in with my name and address, my ID card details, the serial numbers of all the bills I wanted to exchange, and my cell-phone number.

At the second counter, I then had to present the completed form along with a photocopy of my ID card. I had to sign on the photocopy which an official then stamped. With my banknotes, the form and the photocopy of my ID card, I then went to the next queue to get my currency converted at a third counter. The whole process took about two hours. For most people in the busier parts of the cities, it took much longer.

Day 1 of the banks opening. Poor, desperate people, whom the government treats like slaves or perhaps insects. Somehow these people have been brainwashed into thinking they live in a free country. My granddad kept photographs of British royalty on the walls of his office until his final days, for he had realized that the British had treated him much better.

Anyone who thinks that a country which wastes two hours of every citizen’s life to convert his own $60 can ever hope to be an economic power is drinking too much Kool-Aid and cannot do primary level math. Forget any possibility of removing unaccounted for money or reducing corruption, what Modi is doing is a recipe for the destruction of whatever legitimate economy there is.

That same afternoon, I went to the post office with a friend who wanted to get his money converted. After waiting a long time there, we found out that the post office had run out of cash. Since then most ATMs have had limited amounts of cash available and banks keep running out of cash as well.

The queues have continued to grow. People start lining up late into the night waiting for banks to open and still have to go back home with no cash. What started with two hours of queuing is becoming an endless slog now.

An endless queue to convert Rs 4,000 (USD 60). Will they actually go home with their new cash?

The Problems Go Much Deeper

Half of India’s citizens do not have a bank account and around 25% do not even have an ID card. These are the country’s poorest people, who have no way of converting their money – even if they learn how to do it, which is already a nigh insurmountable hurdle. Also, those who are old, disabled or sick have no choice but to suffer, for without personally visiting a bank branch office, one cannot convert one’s banknotes.

An old disabled woman struggling to get her money converted. One has to be utterly heartless not to feel angry about the situation.

97% of the Indian economy is cash-based. With 88% of all outstanding currency no longer usable, the economy is coming to a standstill. The daily-wage laborer, who leads a hand-to-mouth existence in a country with GDP per capita of a mere $1,600, no longer has work, as his employer has no cash to pay his wages. His life is in utter chaos. He is not as smart as Modi - despite the fact that Modi has no real life experience except as a bully and perhaps in his early days as a tea-seller at a train-station. He has no clue where his life is headed from here.

These people are going hungry, and some have begun to raid food shops. People are dying for lack of treatment at hospitals. Old people are dying in the endless queues. Some are killing themselves, as they are unable to comprehend the situation and simply don’t know what to do. There are now hundreds of such stories in the media.

Small businesses are in shambles, and many will probably never recover. The Hindu wedding season has just started and people are left with unusable banknotes. Their personal and family lives are now an utter disaster.

Desperate people raiding a supermarket

Lacking moral and rational anchors, and hence compassion, members of the salaried middle class are unperturbed. Their salaries get taxed and most of the bribes they are getting end up in gold or property investments. In their minds, poor people and small businesses don’t matter. In the hypocritical culture of India, as long as the middle class is not suffering - for the time being — they prefer to take what they believe to be the higher moral ground.

Why This Problem Will Get Much Worse

Let us do a few simple numbers… What has been made illegal comprises 88% of the monetary value of all currency notes in circulation. In an economy based primarily on cash, the liquidity of cash is the lifeline of the economy. This requires that 88% of the new currency be rapidly dispersed into the market.

The Indian government has absolutely no history of being able to entertain a project of this type or magnitude ever and after the British left, India’s institutions have continued to deteriorate, so hope is not an option. If they fail to issue enough new bills, the very limited supply of Rs 100 notes will disappear within a few days.

As any rational person has a tendency to store good money while using bad money in transactions, people will hide all newly released currency as well as Rs 100 banknotes until full liquidity is restored. The rich and the well-connected have already done what was needed.

A reminder of Gresham’s law for Modi: “Bad money drives out good money.”

Those who have no need to convert their money as all their cash is already in the banking system (as is the case with the salaried middle class), which they think is making them look like a heroes in the eyes of Modi and is giving them a sense of moral superiority – they are nothing but turkeys being groomed.

Banks are giving out a mere Rs 20,000 ($300) a week at best. Their lives will suffer and for all intents and purposes, their accounts are frozen. This is Cyprus ten times over – they just haven’t realized it yet.

Whichever way one looks at the above numbers, India’s economy is going to start suffocating, within weeks, if not within days. And a serious political and social crisis will take place, which will eventually acquire a life of its own. That is when the as of yet unperturbed salaried middle class wakes up with pain.

As in any irrational system, it is not reason and morality that will have convinced them to scuttle their hypocrisy and limited vision, but the violence and pain that they themselves will suffer.

Corruption

Politicians and bureaucrats of course cannot be seen queuing at the banks. Many bank branches apparently had their cash secretly replaced by the now-illegal bills before the first day of reopening. While no more than two bills of Rs 2000 each should have been collected, those better connected apparently haven’t had a problem with this and have been shown showing off packets of the new currency they have. All this cash will do nothing but end up under mattresses, as it has in the past.

Politicians with too much corrupt money (now unusable currency notes), who could not convert it beforehand, are distributing it to villagers as loans. Villagers will take the risk with the tax department, including having to hand over a large portion of it as bribes.

As I walk around, corruption is everywhere and has grown exponentially, not only in financial terms but worst of all, in terms of the humiliation and degradation Indians are suffering. And I don’t know how a humiliated, soulless person can be anything but corrupt.

In village after village people have stopped working, even if they had work, as they can now join the queues at the banks to convert other people’s banknotes for a commission. For many young people, this is a wise entrepreneurial decision, as they are making many times the money they would have otherwise made for now.

But they are being trained to make money from non-productive activities — not from wealth-creation, but from unnecessary problems created by the government. Are they being groomed for a corruption-free society? One has to be naive to respond affirmatively.

Sell your now illegal currency for a 20% discount, which young kids can then convert into legal money at the bank

Fear of the tax authorities means that the level of bribes being offered has gone up. Random people can now impersonate tax officers and collect bribes. People are in the grip of a fear psychosis. Many are emptying their bank deposit boxes, which means that crime will inevitably increase in coming days.

People are constantly worrying about what Modi’s next knee-jerk act might be and how to protect themselves against it. A police state is knocking at the doors.

A receptive environment has been created in which all kinds of rumors are taking wing. Today, salt is selling for Rs 400 ($6) per kilogram, as rumors have been making the rounds that it is about to disappear. This of course creates a situation in which it will actually disappear. The same is happening with sugar. The largely irrational masses are eagerly devouring a great many random rumors.

Lesson for Modi: Never, ever destabilize a society that works through conventions rather than reason, for it has no way to return to a normal state of affairs without a huge amount of pain and violence. Simply look at neighboring countries in order to understand this.

Chronic fear is slowly overtaking the mood of Indians, particularly those who run businesses. They have not only completely lost their trust in the government, but the tax department has been raiding people’s premises to scare those who are trying to salvage what they have.

They have stopped worrying about creating value. Everyone is talking about what to do with the banned banknotes, for even if they are fully accounted for, people fear that the increasingly rapacious tax authorities will make trouble anyway.

Uncertainty has gripped the populace. Not everyone is capable of grasping the situation and dealing with it.

People are now converting whatever they can into gold, silver, and mostly for the first time into the US dollar and other foreign currencies as well, all of which are trading at huge premiums. Money is also moving out of the country. Gold has shot up to as much as $2,800 per ounce, if you can find it.

Lesson for Modi: The reason people trust Switzerland is because it has hundreds of years of history of protecting private property. Singapore has done an equally good job, but it still lags behind Switzerland, because trust requires a very, very long history of institutional honesty and integrity. India is back to level zero for now. When future generations look back, they will see the current demonetization as the worst event in the history of post-colonial India.

Finally, the new bills have actually worsened the counterfeiting problem they were supposed to solve. People do not have any experience with what the new banknotes look like. Within a mere three days, counterfeits are already in circulation. Contrary to the government’s claims, the new bills are not any more sophisticated than the old ones and are made of simple paper.

A mere three days after the first release of the new banknotes, fake currency is already in circulation

Why Has the Government Miscalculated?

The most productive job Modi ever had was running a tea-shop at a railway station, which he then gave up to become a bully. He is a complete stranger to complex thought. He is simplistic in his thinking and does not understand the second-order consequences of his actions.

First he increased Hindu fanaticism, then he participated in collectivizing people using nationalism, then he created problems with Kashmir through his heavy-handedness.

A simplistic mind is also arrogant. Such a mind — unable to conceive the possibility of unintended consequences — thinks all that has to be done is to issue orders and everything will fall in place. Alas, this may work when shooting innocent people in Kashmir and in other destructive ventures, but when it comes to institutionalizing social progress, a more complex and intelligent approach is needed.

All of India’s institutions have continued to deteriorate since the British have left. They are rotting away and are in shambles. India had some breathing space over the past three decades because of the free gifts of the internet and cheap telephony which it got from the West.

This has merely made Indian governments more rapacious and so-called educated Indians more arrogant. They collectively lack the capacity to improve India’s institutions after having destroyed them. Demonetization may well be the straw that will break the camel’s back by accelerating the deterioration of India’s institutions toward the point of breakdown, perhaps in weeks if not already in coming days.

Conclusion – What Can One Do?

As Indian, be a speculator – even if the government does not like it and will blame you for all ills. Try to keep as much of your money in cash, in Rs 100 notes. Rs 2,000 notes have no value when you go shopping for groceries. Keep a supply of water and dried food sufficient for a few months’ needs.

Cash is disappearing and even before that the economy was stumbling. It might take just one more small domino — more strain on liquidity — to bring about systemic problems in the economy that could bring crucial transactions, businesses and supply lines to a halt.

If systemic violence spreads, everything will be complicated further. Think of Zimbabwe. It pays to be prepared, particularly when we are ruled by zombies.

Image captions by PT. Photos and videos by courtesy of Jayant Bhandari.

Jayant Bhandari grew up in India. He advises institutional investors on investing in the junior mining industry. He writes on political, economic and cultural issues for several publications. He is a contributing editor of the Liberty magazine. He runs a yearly seminar in Vancouver titled Capitalism & Morality.

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The following is the transcript of a presentation made by BullionStar's CEO Torgny Persson on 14 July 2016 to an audience at the FreedomFest conference in Las Vegas, USA:

Liberty is Prevailing

Freedom, ladies and gentleman.

Freedom is the right to think, speak and act the way that we want.

I think I speak for a lot of us here today in saying that we no longer believe in the imposed concept of a government taking care of us from cradle to grave.

I love the principles on which this country was founded.

Freedom of Speech,
Freedom of Thought,
Freedom of Movement,
Capitalism,
and Property Rights

But a lot has changed since. Authoritarian tyrants have kidnapped free society. But make no mistake, people across the globe are waking up. The tyrants are losing.

We can see clearly that the tide has turned. Political correctness is crumbling.

We had Brexit in the UK a couple of weeks ago. The end of the world according to mainstream media. We have the rise of Donald Trump here in the US. Love him or hate him but he’s breaking political correctness. He’s saying the unsayable.

It is starting to dawn on the tyrants that it’s all over.

More speech is always better than less speech.

So people are rising up, finally, people are rising up.

Liberty is prevailing! Liberty will always prevail. Freedom is a powerful concept. Freedom to think, say, read and do what you want.

We don’t need to be instructed how to live our lives. We have been oppressed by the government and lied to by the media long enough. Freedom is a force that can’t be stopped.

We don’t need anyone’s authority to govern our own lives. Freedom, think about it, is simply the concept of living your life the way you desire.

Introduction

My name is Torgny. I’m an economist by training. I’m the founder of 3 different precious metals dealers worldwide. Being Swedish by origin, I first started the Swedish bullion dealer LibertySilver.se in 2008. Liberty because if you own precious metals, you can gain independence and liberty from the oppressive financial system as you’re not locked in to the fraudulent banking system.

I have a Master’s Degree in Economics. If you ever get the chance to study economics, don’t do it. Economics is upside down. Instead of modelling what is actually happening in the real world, economics is a product of professors peer reviewing each other, holding each other’s hands, coming up with obscure models that they try to push onto the world.

First, I will cover what is happening on the gold market by looking at the most important gold trends of 2016. What’s happening in the gold market and what can we expect ahead?

Then I will talk about Singapore because Singapore is the very best place in the world for wealth preservation and asset protection and it’s the best place in the world to buy and store precious metals.

And I will conclude by talking about how I have set up BullionStar with the purpose of servicing offshore bullion protection. I moved to Singapore with my family 3 years ago to establish BullionStar in Singapore simply because it is the best country in the world from which to offer precious metals services for international diversification, and asset and wealth protection.

Global Economy 2016

To understand the gold market, we have to understand what is happening in the global economy - and the relative ‘health’ of the global economy today.

Stock and bond markets have been performing well over the last years but the underlying economies are struggling. Record low interest rates, sub-zero in many countries, and massive money printing have’t triggered any real economic or trade growth.

We can even see that the viability of innovating, of creating new products, of selling products for a profit has become secondary to the goal of just having a corporate presence on the public investment markets. Today, it’s more important for company managers to list their company on the stock exchange than it is to actually create an innovative product that makes money.

So we have an economic system that incentivizes reckless debt behaviour, which leads to asset bubbles, boom-bust cycles, massive debt, mal-investment and inflation.

But how has this monster of debt and inflation been created? What’s at the core of our current economic system?

Today’s Monetary System

It’s the monetary system that allows government to steal through taxation and inflation. Taxation is of course the same as theft. They just had to invent another world of it. Income tax of 30% sounds a hell of a lot better than income theft of 30%. Everyone agrees that it would be wrong for me to go up to someone in this room with $100 and steal $30.

Just because a group of people get together and call themselves the government, it doesn’t change the immorality in stealing.

The monetary system, of course, also redistributes wealth via inflation. Inflation is also theft but in a discreet way as it happens slowly without the general population being aware of it. What did a gallon of milk cost when you were young? What did an ice cream cost?

Inflation is a redistribution of wealth from late receivers of newly printed money i.e. you and I, normal people, to the early receivers. i.e. the government, the central banks and the commercial banks.

The US Dollar is important in this context because the US Dollar is the reserve currency of the world. As we can see from this chart, the US Dollar actually did pretty well until the beginning of the 20th century. But what happened in the beginning of the 20th century?

The Federal Reserve was created in 1913 and the world went off the gold standard.

Since then the world’s currencies have lost 99% or more of their value.

We have been indoctrinated into believing that the world’s current monetary system is a natural system, but nothing is further from the truth. We should have moved on from it a long time ago as this monetary system really is the root cause of the financial debt disease that we are seeing today.

How is Money Created Today?

Today more and more people are becoming aware of the Federal Reserve’s counterfeiting of money through Quantitative Easing (QE). However, it’s still a mystery to many how most of our money is created today.

Most of today’s money is created not by central banks, but by normal commercial banks. It’s just created out of thin air when the commercial bank extends a loan. There’s nothing backing this money creation, there’s nothing tangible to it.

Let’s illustrate how it works with an example. We have Robert who is in the market for a 1 million dollar house. Robert’s career choice is as a fast food restaurant worker, part-time, on minimum wage. But Robert knows he has to look credit worthy when meeting his bankster so he dusts off his tie for the occasion.

The bankster takes a quick look at Robert and judges him as credible. No problem. You’ll get the mortgage. Now, where did the USD 1 million that the bank lent Robert come from?

Nowhere.

It was created out of thin air when the bank extended the loan to Robert. It was just created as a book-keeping entry in the bank’s accounting system out of thin air.

This is how approximately 92% of US money supply is created today. It’s created by banks out of thin air when lending. It’s easy to understand, but for some people hard to believe as it’s just too absurd.

92% Electronic Currency

Only 8% of the US Dollar money supply today exists in physical form and even this 8% are just worthless pieces of paper that only have a value as long as people can be brainwashed into believing they have a value.

Some people actually still think that the US Dollar is gold backed. As a thought experiment, let’s calculate what the price of gold would have to be for the US Dollar to be backed by gold.

The Federal Reserve claims to hold, and note that I say claims to hold because there has never been any independent proper audit of the US Treasury vault holdings, 8133 metric tons of gold. At the same time there’s about 17 trillion of US Dollars in circulation. The price of gold is currently about USD 1300 per troy ounce. The US gold reserves as valued in US Dollars would therefore be worth about 340 billion dollars. This means that the price of gold would have to rise 50-fold for all outstanding US Dollars to be backed by gold today. 50-fold. This is how much the value of our currencies have been eroded.

What is Money?

We can thus see that the world’s current money system isn’t serving us the people. But what is money in the true sense?

For something to emerge as money on a free market, it needs to serve three purposes.

Medium of Exchange – Money is the intermediary in the exchange of goods and services. If we don’t have money, we’re back to barter systems of medieval times which is very impractical.

Unit of Account – Money is supposed to serve as a measuring stick that everyone understands. Money is a frame of reference. And sure, if I tell you that something costs $100 you have a pretty good idea how much that is, but the problem is that it takes $100 today to buy something that cost $1 a hundred years ago.

Store of Value – Money is supposed to keep its purchasing power over time, to keep its value.

Let’s now compare paper currency and gold to see which has the best monetary characteristics.

Portability: Paper money and gold can both be moved. Electronic currency can be moved very easily but can also be deleted by the stroke of a key.

Divisibility – Let’s do an experiment. I have here a 10 dollar note and a 1 gram gold bar. Now what happens if a split this 10 dollar note, what does it become? Does it become two 5 dollar notes? No it doesn’t, it becomes two worthless pieces of paper. Now what if I instead split this 1 gram gold bar into two equally sized pieces, what does it become? It becomes 2 bars of 0.5 grams each which together is still what I had at the beginning i.e. 1 gram! This tells us a lot about the worthlessness of our paper money.

Fungibility – Fungibility means that each and every unit is indistinguishable from the other

Intrinsic Value – Gold has a high value because of its metallic characteristics. It has high density, it’s soft but still strong, and it’s what’s called malleable, meaning that it can be stretched without breaking. A 1 oz gold coin can actually be stretched out 50 miles without breaking. That’s 6 times all the way up and down the Las Vegas strip!

Imbalances from Using Dishonest Money

By using dishonest money as the world is doing today, we get huge global imbalances.

The US is running a massive trade deficit. There’s much more stuff coming into the US than there is leaving. How are the excess imports paid for? The answer is that it’s paid for by newly created money.

It’s interesting to note that it’s only possible to run trade deficits to this enormous extent if you issue the currency that is used as reserve currency. This is thus only possible in the US, as the US Dollar is used as the world’s reserve currency. In any other, non-US country, it wouldn’t have been possible because the currency would depreciate when there’s a continuous trade deficit.

When the currency is depreciating, it becomes more expensive to import goods and it becomes cheaper for others to buy exported goods. Trade is therefore rebalancing.

This is not happening in the US though and the reason for it is that the US Dollar itself is demanded as reserve currency around the world.

There’s a lot of finger-pointing towards the US because of this, blaming the US for living beyond its means. I don’t agree with that though as it is the rest of the world, i.e. non-US countries, that is demanding US Dollar as reserves which they don’t necessarily have to do. So this is what’s called an exorbitant privilege.

China & US Debt

Things are changing rapidly though as structural changes to the system are long overdue. The system we have today is in no way sustainable. The US Dollar is losing structural support from surplus countries, most notably from China.

Foreign countries are no longer increasing their reserves of US Dollars. China is no longer increasing its holdings of US Treasuries. They stopped buying them. So the system of the US Dollar acting as a reserve currency is very fragile and is only holding together based on the premise of more bribes. Private investors, especially in countries where the markets and currencies are failing such as in South America, buy bonds but they only do so on the promise of more and more easy money to come. People have been conditioned for many decades to run to the US Dollar as a safe haven although I predict that to soon change.

Foreign governments and particularly China are not interested in owning anymore US debt though. The question is when will the private support for the US Dollar stop, because then there’s no one to support US debt anymore except the Fed itself. When will it happen? Timing wise I’m not sure. When I started Liberty Silver in 2008, I thought it would happen much sooner that it has. Sooner or later, it’s going to happen though. We will first get a strong deflationary pressure, we are basically in that phase already. Credit will default but this will not be accepted by the governments, who will buy up debt at all costs, eventually leading to a crisis of confidence and then we’re in big trouble because then people will start to spend their savings quickly leading to hyperinflation. And when that happens, debt and credit is not a good store of value.

And who best understands this situation today? China still has a big surplus though so what do they buy instead?

Chinese Gold Rush

They are buying tangible assets. Gold is one such asset but China is also a major foreign direct investor in all sorts of projects from mining in Africa to infrastructure in central Asia.

The Chinese understand that the days of the US Dollar are numbered.

Whereas Westerners have mostly been shunning gold for the latter part of this decade, the Chinese have been vacuuming the world’s vaults for physical gold. This chart shows that the Chinese, including both the government and private sector, are holding at least 16,000 tonnes of gold.

The Chinese government even runs adverts on national TV encouraging everyone to buy gold. Just imagine the US government running adverts on national TV encouraging people to buy gold.

Why do the Chinese do this? The simple answer is that they understand that gold is a stable savings asset, but they also understand that the days of the US Dollar as the reserve currency of the world are numbered, and they understand that gold is a much better safeguard against inflation and currency destruction than anything else.

This trend of gold flowing from the West to the East is the same as a flow of power from the West to the East. It has huge geopolitical implications because whoever has the gold in the end has the power. In my opinion, the Chinese are buying as much gold as they possibly can without breaking the neck of the market.

Western vs. Eastern Gold Mentality

I’m in a fortunate position because I’m running 3 bullion dealers across the world, both in the west and in the east. I have two businesses in Europe and one in Singapore in Asia so I’m fortunate to be able to compare eastern and western gold mentality.

What I see is that when the price of gold is going up, westerners buy. In the west, most people are looking to get a return on their investment. That’s how we’ve been conditioned because if we don’t get a return, inflation will eat up the value of the money.

But when the price of gold is dropping, there are a lot of Asians buying. We get queues outside our shop. Easterners are not looking for a return on their investment. What I see is that easterners don’t view gold as an investment vehicle. They view gold as real wealth, they view it as a safeguard against inflation and currency destruction. They view it as savings which provides independence.

In the west, we see the opposite. When the gold price is dropping, Westerners give up. It’s not good for my investments so I need to chase some other investment. So in the West, people instead buy when the price goes up, due to being trend seekers, as we’ve also witnessed this year.

But in my opinion, we can learn a lot from the Eastern mentality because the Eastern mentality is that gold is savings. There’s no counterparty risk for gold. You don’t have to trust any government, central bank or commercial bank when you buy and hold gold. You don’t need to trust anyone because you hold your wealth yourself so you’re in control.

Simply put, in the East, people are value buyers and buy for generational wealth, whereas in the West people mostly buy gold for the lure of currency profits.

How can Westerners piggyback this successful strategy to save/invest in gold outside the reach of intrusive governments?

Singapore’s Story

Let’s take a look at Singapore. I’ve been living in Singapore for about 3 years. I relocated with my family 3 years ago from Sweden, the worst socialist country in the world. And the country with the most political correctness by far anywhere. You think it’s bad in the US, check out Sweden. Socialism is cancer. I’m not going back there.

I moved to Singapore simply because it’s the best country in the world for precious metals, it’s as easy as that. Whether my kids agree, I don’t know but they like to play with silver coins and actually understand the intrinsic value of precious metals much better than most people in their 40’s and 50’s.

Singapore is the new Switzerland for asset protection. It’s the best and safest country in the world for wealth preservation.

Singapore is unique. Let me tell you my story about when I first went to Singapore. My business partner and I first visited Singapore on an exploratory trip researching whether to establish BullionStar in Singapore after we discovered that the Singaporean government was abolishing the sales tax on precious metals in Singapore in 2012. This is interesting because how many countries today are deregulating anything let alone precious metals? In other countries the rulebook just gets bigger and bigger. I know there’s many absurd examples from the US. From Sweden where I originate, the guidance on the sales tax that all companies must know and follow is 3,000 pages long. That’s insane. The rulebook of absurdity is just growing. Singapore may be the only country that is taking the opposite route of actually removing rules.

In Singapore, the government wants to create a trading, transit and storage hub for precious metals so they actually removed the major hindrance to that, the sales tax (GST / VAT as it’s called in some countries), which is rather unique.

So on my first trip to Singapore together with my business partner, we went to one of the suppliers in Singapore to discuss business opportunities. We had a general business discussion and they said, have you talked to the government yet? So I’m from Sweden where if you send a question to a government authority, in best chance you may get a reply after a few months if you’re lucky and they’ll most likely harass you with an inspection or audit while they’re at it.

We’ve been through a lot of that in Sweden even though we’re following all the rules meticulously.

The Singapore supplier told us that we can indeed contact the governmental trade agency in Singapore so I said why not and I sent the government contact person an e-mail 11 pm. I get a reply in three minutes saying that we’re welcome to meet them the next morning at their office.

Baffled, I replied that we will show up so we rock up to their office at 9 am in the morning. There are two guys meeting us. They are in their 20’s - 30’s and we discuss business opportunities with them. They tell us that we are welcome in Singapore, and that they want us here, and they encourage us to get started, and facilitate the introductions to different stakeholders and suppliers.

I met many bureaucrats in my life but that has never happened before, because bureaucrats are normally just interested in growing their reach, killing anything productive around them. Whereas in this case, they wanted to help us and even came up with their own private business ideas. And this is the Government! Where else would that happen, would it happen in the US? ‘

We were quite amazed and we went for it and established BullionStar in Singapore four years ago.

So in general terms, the Singaporean government is keen to incentivize productivity and they understand that the private economy is the backbone of the economy.

Singapore was actually literally kicked out of the Malaysian Federation 51 years ago. With nothing going for them and with no natural resources, the journey since has been a tremendous one. In a mere 50 years, which isn’t a very long time when it comes to building a country, they’ve established the premier financial center of the world. They have done this with a very strong rule of law where there’s a lot of freedom within a set framework. You have a lot of freedom as long as you keep within that framework and you especially have good business freedom.

Now, if you bring in guns or drugs, you’ll be put away for a long time if not forever. I’m a libertarian so I don’t really agree ideologically but I can see how this has been serving Singapore very well as a city-state, as there’s no shootings whatsoever and very little drugs.

Singapore is the most business friendly country in the world. Hands down. The Singaporean government runs Singapore like it was a company.

They focus on productivity and innovation and luckily they are a too important as a country to be listed on any grey or black list because of their low tax regime and financial protection. They are also very good diplomats. A few years ago, OECD put pressure on Singapore to start signing Tax Information Exchange Agreements. The Singaporean government said, yes we will start signing these agreements. To date more than five years later, they have signed one such agreement with…Berumda…Strengthening Singaporean-Bermudian ties to ensure that the OECD doesn’t bother them.

Compare this to Sweden is day and night. Sweden is often perceived as some sort of mellow well-working ideal. Bernie Sanders is touting Scandinavia as some sort of socialistic dream. Let me tell you, he’s got no clue what he’s talking about. Sweden’s been going downhill severely in the last decades. Crime is rampant. Due to the migration crisis, Sweden tops all countries for sexual violence. In 2015 alone, 163,000 asylum seekers predominantly from Syria and Afghanistan, arriving into a country with a population of only 9 million. Everything is totally breaking down. You could never run a storefront precious metals dealership in Sweden like we do in Singapore.

Sweden is also practically cashless. Cash is rare as a payment mechanism, and oftentimes no longer accepted. I was very concerned about my family while we still lived in Sweden even though my Swedish bullion dealer business, Liberty Silver, didn’t have a physical shop but just sent parcel deliveries via insured registered mail.

In Singapore, you can see currency exchangers exchanging tens of thousands of dollars without any security glass or any protection whatsoever and it’s completely normal. A couple of months after I moved to Singapore, I walked past Raffles Place, in the Central Business District, and there was a currency exchanger in the process of counting cash in a counter, standing outside his booth with a currency counting machine. Just when I walked past, there was a gust of wind and a pile of bills were taken by the wind and this was on the busiest street of Singapore with lots of people walking by. The exchanger calmly walked around and picked up the 100 dollar notes like nothing had happened. I had to veer to the side not to step on any of them.

What does that tell you about the security in Singapore? It’s incredibly secure. No one would dream of doing anything. It’s a combination of no social exclusion and harsh penalties. There’s no unemployment whatsoever in Singapore. Every shop you walk into has a sign: “we are hiring”. There’s a shortage of labor. Social standards are thus good. At the same time, the punishments for violent crimes are extremely harsh and includes caning.

Michael Fay, a US citizen, was actually sentenced to six strokes of the cane in 1993 after vandalising cars. The US protested loudly that caning was excessive for a teenager who committed a non-violent crime. The US embassy pointed out that the damage to the cars he vandalised wasn’t permanent but the scars from the caning would leave permanent scars on the US citizen. Bill Clinton pressured Singapore to grand Mr. Fay clemency but Singapore stood its ground and carried out the sentence although reduced to four strokes. It’s a rather harsh punishment. Your buttocks are bared and after three stokes, deep cuts are usually opening with blood squirting out. The enforcer must use the full force of his arm.

So this is an example of the rule of law in Singapore and whether you like it or not, it seems to serve as a deterrent.

Bullion in Singapore

Singapore is the very best country in the world for buying and storing precious metals.

There are no taxes on bullion whatsoever in Singapore. The Singaporean government has actually deregulated the precious metals market. There is no sales tax, no capital gains tax, no import or export taxes, no tariffs or restrictions, no inheritance tax, no gift tax, no dividend tax. Before 2012, there used to be GST (sales tax) on physical bullion, but as I mentioned they abolished that tax in 2012 as they want to encourage bullion dealers to establish in the country.

As we all know, Western countries introduce numerous invasive laws targeting privacy and that place the right to buy and store bullion confidentially under attack.

Importantly, there are no reporting requirements, whether domestically or internationally, when someone buys or stores precious metals in Singapore. Your bullion is your private business and we are under no obligation to report your holdings to anyone. If you buy and store bullion with us, we don’t report it to anyone. You can hold bullion completely confidentially in Singapore and that also applies to FATCA. There’s no FATCA reporting for BullionStar because we are not defined as a financial institution. We are keen on helping you defend your right to buy and store bullion confidentially without your local authorities prying into your bullion ownership.

The Singaporean government has chosen precious metals as a growth industry. Singapore is keen on creating a trade, transit and storage hub for precious metals in Singapore.

As regards safety, you can confidently walk into our storefront bullion retail store in central Singapore and buy bullion with cash, then hand carry your bullion out without being hassled due to the zero crime rate. This has the advantage that the insurance cost for bullion in Singapore is low. By the way, the sentence for robbery in Singapore is up to 20 years in prison and a minimum of six strokes of the cane.

In Singapore, property ownership rights are also very strong. Singapore doesn’t allow frivolous litigation. Remember that it’s less than 100 years since the US outlawed gold ownership. Western governments have a long history of stealing. It seems they can’t help themselves when it comes to stealing. Singapore has no history of any confiscations, seizures or anything like that.

So, storing bullion in Singapore is an insurance policy against government intervention, wealth confiscation and frivolous litigation.

What makes BullionStar unique is that we combine online usability with physical accessibility.

BullionStar.com is our website where you can buy, sell and store physically allocated and segregated bullion.

Buy & Store Bullion in Singapore

It’s very easy to get started with us. Other bullion dealers also say that it’s easy but then they nonetheless slap you with 7 steps and require you to send in documentation. Signing up for an account with us is a one page registration form. It takes less than a minute. Much easier than signing up for a Gmail account or booking a flight online.

There are no documentation requirements. We don’t force you to send us any documentation at all. You input an e-mail address, password, your address and select a PIN number. It takes, if you’re quick on the keyboard, 30 seconds, and placing an order takes another 20 seconds. You select the items to buy, you go to the checkout and submit your order. One page checkout. I think I speak for many of us in how unnecessarily complicated everyone makes their online interfaces. PayPal, booking a flight ticket, government agencies, banks. They try to trick you into different things you don’t want. Add insurance, add car rental etc.

It should be easy to buy and store gold. A lot of customers are genuinely surprised about how easy we make it. We get good feedback on how easy it is to deal and transact with us, and we have over 600 genuine Google reviews with an average of 4.8.

You can handle everything online 24/7. You can buy, sell, store, order physical withdrawal of your metals online and even audit your metals online.

Trust is very important in the bullion industry. If you trust as with your hard-earned savings, you have to be able to trust us. What I tell our customers is, don’t trust us. Do your own due diligence. Don’t take my word for it. Read up on us. Google us and do your own due diligence.

BullionStar Vault Storage

If you choose to buy and store bullion with us, it’s important to know that we have five different auditing methods. We employ the LBMA-approved auditor Bureau Veritas to do third-party audits on all customer holdings bi-annually. We have something called the Live Audit Report where everyone can anonymously check on their own and all other customers’ bullion holdings. Furthermore, we allow and encourage customers to walk-in to our bullion center in Singapore and do their own auditing of their own metal. If you choose to go to Singapore to audit your metals, you don’t even have to notify us beforehand. You can just show up and ask to audit your metals, and we facilitate this on the spot. We will bring out your metals from the vault to the meeting room. You can go through everything and compare your bars and coins against your records and have a look at your own metals. This auditing program it thus very comprehensive.

We also take photos of your bullion and upload these images to your account. As soon as you have settled your payment, we process the metals into vault storage and take pictures of the actual bullion so that you can compare the bar serial numbers with your invoice. If you then come to our bullion center to do a physical audit yourself, you can again check on the serial bar numbers and if you physically withdraw your bars, those are the exact bars you receive.

With us, you own specific products. Your bars are allocated with you holding the direct legal title to the physical metal.

You can of course have your products shipped to you at any time fully insured. Even though Singapore is the safest country in the world, we have full insurance protection with the largest specie underwriter in the world, XL Insurance, for all risks at full replacement value. You can download the insurance document online. What’s good is that as there’s virtually no crime in Singapore, it makes the storage premiums low. We charge 0.39% of the average value per annum for gold and 0.59% for silver which includes full insurance for all risks, and all handling and online access for your segregated and allocated gold, which is very competitive.

Just like you can physically audit your metals, you can also come in to our shop to physically withdraw your metals without any prior notification. You show up, present your ID and tell us that you want the metals now and we simply hand over the metals to you.

Walk-in Bullion Center in Singapore

We can do this as our vault is actually integrated into the same venue as our shop.

Our bullion center consists of a retail bullion shop, showroom and vault in one and the same venue truly making it a one-stop-shop for everything precious metals. Our shop used to be a bank branch and has an old style bank vault built into it. The vault was built several decades ago and I believe the reason why the vault is still there is because of its sheer impenetrability. It’s 30 inches thick, constructed from concrete and full of steel bars in the walls.

This is a unique shop. Nowhere else in the world do you have the flexibility of buying, selling, storing, depositing, valuing, physically auditing and physically withdrawing metals in one and the same storefront place without any prior notification.

You can just walk in, we have 20 showcase displays full of precious metals. So unlike many other dealers, we don’t hide online on the internet and we believe this combination is quite unique.

Singapore is a long way from the US and you don’t need to visit us to buy and store bullion with us. You can handle everything online. But if you ever go to Asia, I highly recommend that you pay us a visit to have a look. Whether you’re a customer or not as it’s a pretty cool concept.

BullionStar Cash & Bullion Account

Another unique feature that we offer is our BullionStar account. If you’re considering opening an offshore account, we have the ideal solution for that. It’s becoming more and more difficult to open bank accounts abroad. This is true generally but especially true for US customers.

With a BullionStar account, you can hold not only bullion on your account but also cash. You can hold US Dollars, Euros and Singapore Dollars on the account. It works like a bank account but we are not a bank. This is what is called a stored value facility and is under the same regulations as e.g. how PayPal holds client money.

As we don’t operate under the risky fractionally reserved banking system, this is much safer than a bank account.

It makes it very easy to trade physical bullion, and makes it easy to average in or out of positions.

Funds can be held indefinitely on the account and can be used towards purchasing bullion at any time or you can withdraw your funds at any time.

BullionStar Gold & Silver Bars

BullionStar Gold & Silver Bars are the world’s first and only gold & silver bar traded without any spread without the buy and sell price. This means that at any given point in time, the buy price is the same as the sell price.

What’s the hook you might ask. Well, the initial price premium is slightly higher compared to the spot price of the metal than for other bars of comparable price, but instead there is no spread so you don’t have trading cost whatsoever thereafter.

The bars are also very aesthetically attractive and if you haven’t been yet, come by our booth 425 to check them out.

The BullionStar gold bar is produced by the Swiss refiner Argor-Heraeus and there’s an inscription on the back side of the bar stating “Money since 4,000 B.C.” matching our ideological belief that gold is money.

The BullionStar silver bar is produced by the renowned German refiner Heraeus.

These bars have become tremendously popular as they eliminate the often large spreads faced by physical silver investors.

BullionStar Offshore Bullion Solutions in Summary

BullionStar was set up for the purpose of international diversification, and to provide confidential offshore bullion storage while being very accessible and transparent for the customer him/herself.

Even though we have a lot of local Singaporean customers given our local shop, it was, to a large degree, set up to cater to offshore bullion protection specifically.

There are no taxes on bullion in Singapore and there are no reporting requirements whether locally or internationally. We treat your holdings with full confidentiality although we are very transparent to our customers.

BullionStar is unique in that we combine online usability with ease of registration and ease of online trading coupled with the accessibility of a physical bullion shop and vault in central Singapore. It’s a one-minute process to sign up and place your first order with us.

With your BullionStar account, you can hold both bullion and cash funds in US Dollars, Euros and Singapore dollars on the same account, which is very convenient as it takes out the banks as the middle man between you and us.

When you hold metal with us, it’s your metal – fully allocated and segregated. We deal with physical metals only. With us, you specifically choose which items you buy. You place an order on e.g. a 1 oz PAMP gold bar. We upload pictures of the specific gold bar that you own to your account. We input the serial bar numbers on your invoice. We store that specific bar for you specifically and you have the legal title to that gold bar.

You can then follow your holdings online in real-time and when you prefer, you can sell or physically withdraw (or audit) your 1 oz gold bar. When you audit or withdraw your gold bar, you are given the exact same gold bar with the exact same serial number as you were allocated when you bought it.

By introducing the BullionStar Gold & Silver Bars which can be traded without a spread between the buy and sell price, we’ve solved the problem of large premiums that physical bullion investors and savers were facing.

And we have the most competitive storage fees in the industry.

But don’t take my word for it, check us out online and while Singapore is a long way from here, if you’re ever around in Southeast Asia, come and visit us at 45 New Bridge Road in Singapore. Our booth number is 425 where we have some awesome metal on display and also a very cool video game, the QE defender, where the objective is to obstruct the Fed, ECB and Bank of Japan from dropping money into banks.

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The world’s major precious metals mints are currently riding high on the back of extremely strong global bullion coin demand and relatively buoyant gold and silver prices. These mints are predominantly run as commercial enterprises. The sheer scale of revenues that the US Mint, Royal Canadian Mint (RCM), Perth Mint and Austrian Mint have been generating over the last number of years is eye-opening. Not surprisingly, due to their high value nature, revenues from bullion coin sales account for the lion’s share of total revenues for each institution and have been a core driver of their overall profitability.

Official Bullion Coin Programs

Each of these four mints has an official bullion coin program. The US Mint’s program consists of the production and sales of American Eagle Silver bullion coins, American Eagle gold bullion coins, American Buffalo gold bullion coins, America the Beautiful silver coins, and American Eagle Platinum coins. RCM's bullion coin program comprises gold, silver, platinum and palladium Maple Leaf bullion coins, as well as the recently added MapleGrams.

The Perth Mint bullion program is slightly more extensive and briefly consists of the following: Australian Kangaroo gold and silver coin series, Australian Kookaburra silver coin series, Australian Koala silver coin series, Australian Platypus platinum coin series, Australian Lunar gold and Australian Lunar silver coin series. The flagship of the Austrian Mint's bullion program is the Vienna Philharmonic gold bullion coin series, but the mint also produces the Vienna Philharmonic as a silver and platinum bullion coin, as well as historical re-strikes of original Austrian circulation gold ducats, gold guilders and gold crowns.

Bullion Coin Sales Drive Revenues

In fiscal 2015 (to September 30), the US Mint generated revenues of US$2.12 billion on its bullion coin sales. This represented 57.6% of the Mint’s total 2015 revenues of US$ 3.69 billion. Revenues from gold Eagles totalled $979.6 million, silver Eagle sales added $785.4 million, and gold American Buffalos contributed another $252.2 million in revenues.

In 2015, the RCM’s Gold Maple Leaf coin sales generated revenues of CA$1.41 billion while the Silver Maple Leaf coins added a further CA$687 million, giving a combined revenue of CA$2.1 billion. This represented over 80% of RCM’s total bullion revenues in 2015, and nearly 71% of RCM’s total 2015 group revenues.

The Austrian Mint’s annual report for 2015 is not out yet but will be published in early July. For calendar 2014, the Austrian Mint generated revenues of €1.14 billion. The biggest revenue contributors were gold bullion coin sales of €464.2 million and gold bar sales of €391.7 million. Together the Austrian’s Mint’s gold coin and bar sales represented a combined 75% of total mint revenues.

However, profit margins on the mints’ bullion coin sales are relatively small. For example, in fiscal year 2015, the US Mint only generated bullion income of $61.1 million on bullion revenue of $2.126 billion, so this was a margin of 2.87%. Nevertheless, it’s important to remember that the bullion sales of these mints, both in coins and bars, supply a global distribution network of precious metals wholesalers, bullion dealers and banks on the downstream side, as well as a chain of precious metals suppliers, refineries and gold miners upstream. Not to forget the ultimate beneficiaries of bullion sales, the investors and collectors. There is therefore an entire virtuous ecosystem built around the bullion coin output of these giant precious metals mints.

Furthermore, an often overlooked point is that with all four of these mints, profits from operations can and often do go to the mints’ owners in the form of either transfers or dividends. For three of the mints, their owners are governments. For the Austrian Mint it is owned by a government-owned central bank, which is essentially the same thing.

Government Ownership and Dividends

The US Mint is part of the US Department of the Treasury, and reports to the Office of the Treasurer. The Mint is structured as a Public Enterprise Fund (PEF) under 31 U.S.C. § 5136 and generates its own revenues without the need for Federal appropriations. Any revenue that the US Mint deems to be excess to it’s needs is transferred to the Treasury General Fund.

For fiscal year 2015 (to September 30), the US Mint transferred $561 million to the Treasury General Fund, however $11 million of this was income from numismatic / bullion products, as the rest was a seigniorage transfer from the sale of circulating coins to the Federal Reserve Banks. But interesting, this $11 million can actually be used to reduce the US Treasury’s budget deficit.

The Royal Canadian Mint (RCM), a federal Crown corporation of the Government of Canada, is 100% owned by the Canadian Government and reports to the Canadian Department of Finance. Like the US Mint, the RCM is not funded by the Government and is predominantly run as a commercial organization except for the Canadian circulation coin program which since 2014 has been operated on a non-profit basis. Although the RCM made a small loss in fiscal 2015 (its year-end is December 31) due to a one-off impairment, it still paid dividends of CA$53 million to the Government of Canada which was a lot higher than previous years due to strong Maple Leaf coin sales.

The Perth Mint, through a holding company called Gold Corporation, is 100% owned by the Government of Western Australia. Western Australia is a state within the Commonwealth of Australia. The Perth Mint group operates on a fully commercial basis and is self-funding. In its fiscal 2015 results to June 30, the Mint made a profit after tax of AU$14 million and also paid a dividend of AU$10.54 million to the Government of Western Australia.

The Austrian Mint (Münze Österreich) is fully owned by Austria’s central bank, the Oesterreichische Nationalbank (OeNB). The OeNB’s capital is itself fully owned by the Austrian government. Although the Austrian Mint 2015 annual report is not yet published, the Austrian central bank has already reported that for 2015, it received a regular dividend of a cool €89 million from the Austrian Mint. In 2014, the Austrian Mint paid the central bank an even bigger dividend of €184.8 million out of its net profit.

Silver - Gold Production Ratio

The relative importance of gold and silver bullion coin sales varies across each mint and between years since each Mint’s bullion program differs, and demand patterns ebb and flow.

In 2015, the US Mint sold 801,500 ounces (24.93 tonnes) of gold American Eagles and 220,500 ounces (6.86 tonnes) of gold American Buffalos, for total gold bullion coin sales of 1,022,000 ounces (31.79 tonnes). Silver American Eagle sales reached 47 million ounces (1,461.85 tonnes) in 2015, with another 1,060,000 ounces (32.97 tonnes) of America the Beautiful 5 oz coins sold, bringing total US Mint silver bullion coin sales to 48.06 million ounces (1,494.82 tonnes).

Using a metric of silver ounces sold compared to gold ounces sold, this gives a silver to gold coin sales ratio of 47:1 for the US Mint. In 2015, the RCM sold 953,000 ounces of gold Maple Leaf bullion coins (29.6 tonnes), and 34.3 million ounces (1067 tonnes) of silver Maple Leaf bullion coins, giving a silver to gold coin sales ratio of 36 for the RCM. Therefore applied to 2015, it is justifiable for the US Mint to say that it was the world’s largest seller of gold bullion coins and silver bullion coins.

Although the Austrian Mint hasn’t published its full 2015 bullion sales statistics yet, it did reveal to Bloomberg earlier this year that its combined gold coin and gold bars sales for 2015 totalled 1.32 million ounces (41 tonnes), and its combined silver sales in 2015 totalled 7.3 million ounces (227 tonnes). This would give a general silver to gold ratio for the Austrian Mint of only 5.53, which highlights the Austrian Mint’s relative concentration on gold bullion over silver bullion.

In 2014, the Austrian Mint sold 483,700 ounces (15 tonnes) of gold coins, mainly Vienna Philharmonics, and 410,364 ounces of gold bars (12.75 tonnes). Total gold sold was therefore 894,000 ounces (27.75 tonnes). The Mint’s silver coin sales approximated 144.4 tonnes of silver in 2014. This would give a silver to gold coin ratio of 9.63 and a silver coin to total gold (coins and bars) ratio of 5.2.

Overall, the world’s largest mints are a useful source of income for their government owners. More importantly though, these Mints actually make the valuable and high quality investment gold and silver coins and bars that are in such high demand right now, and that also provide tangible economic benefits such as employing large numbers of people around the world in highly skilled jobs.

To learn more about the world's top Mints, please see full profiles of these Mints which have now been published on BullionStar's Gold University pages:

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How about a mansion in every country, an airplane at every airport and a private island in every ocean?

How about 3 eggs?

When Zimbabwe issued its infamous 100 000 000 000 000 dollar bill, it could buy 3 eggs on the day it was issued. A few days later, it could only buy one egg.

Hyperinflating Currencies

Unbacked fiat/paper/credit, and nowadays electronic currency, has a poor track record. After studying this list of 609 defunct currencies, out of which 153 died due to hyperinflation, it's obvious that every time fiat currencies are tried, they die through hyperinflation, war or political decrees.

Using the debt-based US Dollar as a store of value creates massive imbalances and misallocations globally. With an unprecedented debt bubble fuelling paper markets such as stocks and bonds, we stand on the cliff edge of a vertical drop.

Since the Nixon era, we have suffered under a fiat currency ponzi scheme wiping out most of the purchasing power of our currencies.

In MLM schemes, the idea is to recruit naive participants downstream to generate compensation for the recruiter.

This is exactly how the US Dollar and other fiat currencies work.

Early receivers of the MLM scheme such as the government, the banks and the central bank gain purchasing power whereas late receivers, such as us normal people, lose purchasing power.

Fiat paper currency is nothing but a cleverly designed MLM scheme to slowly over time steal and redistribute your private wealth.

Defend Your Assets

With the massive redistribution of wealth taking place through taxation and inflation, you have to defend your assets. Key self-defensive tactics include:

- Protect yourself by keeping your assets out of reach for the government and banks
- Minimize counter-party risks
- Ensure you are protected against currency collapses and bank runs
- Hold your assets in such a way that there's no reporting required to government
- Protect yourself against exchange and capital controls

Crooks can't help steal whether it's directly in broad daylight through a bail-in like in Cyprus in 2013, through taxation, through inflation or through confiscation such as the gold confiscation in the 1930's when the US president Roosevelt took the United States off the gold standard and confiscated private gold holdings.

How can you protect yourself? Gold is the natural answer as it resists inflation, maintains purchasing power and can be held confidentially.

Buying gold isn't enough though. What if your gold purchase is within reach of the government? If you buy gold in your home country, a tax agency such as the IRS in the United States can easily audit the bullion dealer to find out about your purchases. In addition, there's also reporting requirements for certain bullion transactions.

When it comes to bullion storage, diversification is key. It's certainly wise to keep some of your bullion in your own possession but don't put all your gold eggs in one basket.

Offshore Bullion Storage

With the financial repression we are witnessing in the West expressing itself through taxation, inflation, bail-ins and confiscations, it's important to store some of your bullion offshore in a safe jurisdiction favoring confidentiality and security.

Gold has traditionally been stored in financial hubs such as in London, New York and Zurich. With doubts whether there is any gold left in the London and New York vaults which isn't already encumbered, Singapore is emerging as the strongest alternative for offshore bullion storage. Singapore clearly distinguishes itself as the best jurisdiction in the world to buy and store gold:

Singapore has no taxes on bullion

Singapore has no reporting requirements when you buy/sell/store bullion

Singapore has a stable pro-gold government creating a gold trading hub

Singapore has a strong rule of law and is one of the safest countries in the world

Singapore is a centre for wealth and asset preservation

Singapore consistently ranks top 3 in the world for business friendliness

Singapore strongly protects property ownership rights

Although we don't recommend holding wealth with banks, other than what you need for short-term expenses, Singapore is host to some of the best capitalized banks in the world such as DBS, UOB and OCBC.

With banks and international institutions pushing for a cashless society so as to be able to impose negative interest rates, surveil your transactions, and impose restrictions on your wealth, Singapore continues to be a cash-friendly jurisdiction. Although Singapore in 2014 stopped printing the world's most valuable banknote, the SGD 10000 dollar note, it's possible to use cash for all purchases including purchasing bullion. The SGD 10000 dollar note will continue to be valid indefinitely and the SGD 1000 note is still one of the most valuable worldwide.

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This London Gold Market infographic guides you through the secretive OTC wholesale gold market in London. The London Gold Market is the largest gold market in the world and the volumes traded are staggering.

The London Market serves as a price discovery market for the worldwide gold spot price and is home to the London Bullion Market Association (LBMA).

London is also a hub for gold storage with 6,500 tonnes of gold stored in gold vaults around London.

In this infographic you will learn about the importance of the London Gold Market considering

London Gold Market Infographic

To embed this infographic on your site, copy and paste the code below

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In early February, I visited the World Money Fair in Berlin with a number of BullionStar executives, namely, Torgny Persson, CEO of BullionStar, Luke Chua, COO of BullionStar, and also Michael From, CEO of Liberty Silver in Sweden, a company founded by Mr Persson.

The World Money Fair is the world’s leading numismatic and precious metals convention, and is now in its 45th year. Held each year in the Estrel Convention Centre, part of the Estrel Hotel (Germany’s largest hotel), about 9 kilometers south-east of central Berlin, the 3 day event attracts a crowd of between 10,000 – 15,000 precious metals enthusiasts, as well as hundreds of precious metals exhibitors from all over the world, with a strong representation from the German gold market. The exhibitors range from precious metals refineries and mints, to precious metals dealers, to precious metals manufacturers of technical machinery and equipment for the minting and refining industry (such as coin presses), and finally many precious metals numismatics, coin and bank-note dealers. Hence, lots of bullion and numismatic coin collectors also attend the fair. The World Money Fair was previously held in Basel, Switzerland, up until 2006, at which point it moved to Berlin.

World Money Fair Exhibition Floor - Berlin

One of the more intriguing aspects of the convention is that apart from the individual attendees, literally hundreds of precious metals dealers and precious metals suppliers also attend the Fair, primarily to hold meetings and discussions with each other, and also to catch up on the latest offerings from the convention exhibitors. Most of these face-to-face meetings take place within the hotel lobby at the numerous seating areas, cafés, and restaurants that are positioned within the Estrel’s expansive open plan atrium. While most of the meetings are pre-planned, there is an air of spontaneity as customers and suppliers rush around trying to keep to their previously agreed schedules, while bumping into old acquaintances. Some suppliers seemed to literally have numerous back-to-back meetings in the lobby for a good part of the first two days.

I sat in on some of BullionStar’s meetings which included a large German gold and silver refinery, one of Switzerland's biggest gold refineries, and some of the largest worldwide precious metals wholesalers. I found these meetings fascinating as the format was a combination of an informal catch-up, and a more formal discussion of product pricing, business conditions, inventory requirements, bar premiums, and supply channels etc. We also attended dinners on different evenings with a variety of large precious metals suppliers from markets such as Germany, the US and Singapore. I considered it a privilege that during these meetings and dinners I was able to meet some of the top names from the worldwide gold refining and wholesaling sector.

On the first day I took a tour of the exhibition floor. This space consists of an immense series of halls about the size of a few football pitches. There were about 50 national and private gold and silver mints and central banks exhibiting, as well as approximately 250 dealers in precious metals, bullion and numismatics, and about 60 technical suppliers including some large gold refineries. It might seem surprising that central banks, such as Banco de México, would attend such a gathering, but given that many central banks regularly produce their own precious metals coins, it actually makes perfect sense, as they too are in the business of marketing their own coins.

While there were plenty of new releases of limited edition numismatic gold and silver proof coins, I was most interested in the investment bullion gold and silver bar and coin displays, but the vast number of displays (under protective glass) was extensive and varied and would easily take an entire day to see properly. A lot of well-known names were exhibiting, including the Perth Mint, the Royal Canadian Mint, the Royal Mint, South Africa's Rand Refinery, the Austrian Mint, PAMP, as well as MDM Deutsche Munze (Germany), Schoeller (Austria), and China Gold Coin Incorporation. As it's not every day one gets all of these mints in and refineries in the same room, I made sure to chat to staff on the various stands just to get an idea of their views on the precious metals market and their product offerings.

Some of the larger investment gold bar displays in the exhibition were laid on by German precious metals refinery Heirmerle + Meule along with its Spanish subsidiary Sempsa JP, as well as an extensive selection of gold and silver bars from German / Belgian refinery Agosi (Umicore). Agosi even had a display of base metal investment bars which it calls AgosiBase, covering titanium, aluminium, copper, bronze, and brass bars, as well as Sparkasse gold bars which it produces on behalf of the German Sparkasse (Savings Banks).

Britain’s Royal Mint also had a relatively large gold bar display of recently launched gold bars which use the former Royal Mint Refinery (RMR) logo. At the Royal Mint stand I also learned that its precious metals vault at its headquarters in Llantrisant, South Wales, is built to the security specifications of the Bank of England. Hmmm, could this mean that the Bank of England holds some of its gold not in London, but in the more remote Royal Mint vault, which after all is guarded by Britain's Ministry of Defence police force? The Royal Mint also points out on its vault page that customers can 'rest assured' that it operates "outside of the banking and London clearance systems", which doesn't really inspire confidence in the London precious metals vaulting system.

Royal Mint Refinery (RCM) gold bar display - Berlin

Each year, a different country is the ‘Guest of Honour’ at the Fair. This year, it was the turn of The Republic of Korea, and so KOMSCO (Korea Minting, Security Printing & ID Card Operating Corp), Poongsan (producer of coin blanks for 60 countries around the world) and Poongsan-Hwadong (an official distributor in South Korea for a lot of international mints), had large exhibit stands. While attempting to find out some lesser known facts about South Korea's gold market, I was surrounded by helpful representatives from KOMSCO and Poongsan, but a lot seemed to be lost in translation, although I did manage to learn that they are exporting gold bars to Indonesia, which was news to me.

There were also a lot of other mints exhibiting at the Fair but which were focusing on their 'mint coin' collections, such as Japan Mint, Czech Mint, Royal Dutch Mint, Portuguese State Mint etc. Mints usually use the World Money Fair to launch new coins or announce updates to existing gold and silver coins in their range. Surprisingly, the huge US Mint did not have a stand at this year's exhibition, although I understand that it did in previous years.

BullionStar also brought video recording equipment to Berlin and conducted short interviews with various exhibitors about their views on gold. We also recorded some interviews of our own views on the gold market, material which will be used in forthcoming BullionStar audio-visual releases. Finally, at one of the many banknote dealer stands, I purchased a very new looking 100 billion Zimbabwe Dollar note for the knockdown price of €10, which I think is the highest denomination Zim Dollar hyper-inflationary note ever issued.

Rand Refinery display - Berlin

Next Year, South Africa is the Guest of Honour country at the World Money Fair, and Rand Refinery and South African Mint will be ‘guest of honour’ companies representing the South African gold market. The year 2017 is also the 50th anniversary of the launch of the famous Krugerrand gold coin, which undoubtedly explains the timing of South Africa receiving this accolade.

In 2015, we increased our product range to include over 370 different bullion and numismatics products across 9 different product categories. We also released our very own BullionStar Minted Gold Bars and BullionStar Minted Silver Bars – which offer no spread between the buy and sell price.

We also launched the possibility to keep funds on account with BullionStar thereby simplifying the transactional process and allowing for greater convenience throughout the bullion trading process. Furthermore, we enhanced our Bullion Savings Program (formerly Vault Grams) enabling our customers to convert their BSP Grams to physical bullion where they can take full physical delivery at any time without any charge.

Sales in 2015

BullionStar’s sales revenue for 2015 was SGD 89.6m*, up 69.1% from 2014.

Comparatively, the total global bullion demand increased by 1% in 2015 if calculated in tonnage and decreased 7.9% if calculated in USD (based on data from the World Gold Council for Q1 to Q3 2015 compared with data for Q1 to Q3 2014). BullionStar's strong and rapid growth is thus rather spectacular when compared to the industry development as a whole.

Overall bullion demand in Singapore decreased from 5.9 tonnes to 4.8 tonnes marking an 18.6% decrease for the first three quarters of 2015 according to the same publication. For the first three quarters of 2015, BullionStar sold approximately 0.9 tonnes of bullion gold, thereby contributing to 18.4% of the total Singaporean bullion market based on the data published by the World Gold Council.

Despite consolidating market conditions in the bullion industry as a whole, we grew our sales revenue steadily during the year and picked up the pace during the second half of the year. The sales revenue of SGD 53.7m for 2H15 was markedly higher than the SGD 35.9m reported for 1H15. Our growth is derived from a mix of increased sales to domestic and international customers.

By comparing the below pie chart to the corresponding chart for 2014, we can see that gold increased in popularity compared to silver in 2015. Gold consisted of 67.20% of total sales for 2014 whereas it increased to 72.39% of total sales for 2015. One explanation for the proportionate increase in the popularity of gold may be the increasing gold/silver ratio, where 76.4 grams of silver was equivalent in value to 1 gram of gold at the end of 2015, a figure being close to its multi-year highs. With the fall in commodity prices in 2015, silver has been affected to a greater extent than gold due to its predominant industrial usage. Gold, on the other hand, has once again re-emerged as the ultimate safe harbor in times of uncertainty.

What lies ahead

The first couple of weeks of the new year has been characterized by renewed volatility on the global markets following concerns about global debt levels and poor growth. We expect global markets to continue to be volatile during the year. Consequently, bullion stored in a safe and stable jurisdiction like Singapore emerges as a natural diversification option for an increasing number of savers and investors. We expect bullion demand to increase globally in 2016 and particularly here at BullionStar where our strategic focus will be to continue our internationalization efforts by marketing Singapore as the world’s outstanding jurisdiction for buying and storing bullion.

Another noteworthy trend is the increasing popularity of gold coins which have been driven by the increased demand for Canadian Gold Maples for which the Royal Canadian Mint introduced an amended design with improved security features in 2015.

Gold & Silver Prices

The gold price, denominated in Singapore Dollars, declined 4.3% during the year. The gold price started the year at SGD 50.48/gram and ended at SGD 48.33/gram.

The silver price, denominated in Singapore Dollars, declined 6% during the year. The silver price started the year at SGD 0.67/gram and ended at SGD 0.63/gram.

BullionStar Vault Storage

When our customers store their metals with us, they have full control of their bullion portfolio online 24/7. We employ no less than 5 different audit schemes, including third party audits by the LBMA-approved auditor Bureau Veritas, to verify the existence and correctness of the stored bullion. With our vault being integrated in the same venue as our shop and showroom, customers can physically audit and withdraw their precious metals without any prior notification.

By the end of 2015, we stored approximately SGD 53m in precious metals as vault storage provider on behalf of our customers. This corresponds to an increase of 39.5% compared to one year ago.

Customer Satisfaction

We are proud to have earned an outstanding reputation in the bullion industry. At BullionStar, we strive to continuously develop our offering by giving our customers usable online tools, physical accessibility and by sharing our competence and knowledge about precious metals.

About BullionStar

BullionStar is Singapore's premier bullion dealer offering a wide range of precious metals products and services. BullionStar is breaking new ground by introducing modern technology into the age-old precious metals industry. With a proprietary online platform, BullionStar offers customers the ability to efficiently handle and control their bullion holdings 24/7 at their convenience.

With original research and analysis covering the precious metals market on a whole and the Asian market specifically, world renowned analysts Koos Jansen and Ronan Manly keep readers updated on the news that matters.

* This is an indicative report. BullionStar's financial year is 1 July - 30 June. All figures are based on reports from our administration system, are indicative in nature and based on our best efforts.